New study from Wellspring reveals that innovation leaders have bigger innovation priorities and aren’t concerned about supply chain and inflation’s long-term impacts.
CHICAGO, IL — December 7, 2022 — Wellspring, a global leader in software solutions for R&D and Innovation Management, today released findings from its 2022 R&D and Innovation study, which surveyed innovation professionals across the globe to examine key topics and trends in the corporate innovation sector. The study found that 62% of companies have more ambitious innovation plans this year – despite economic uncertainty – and 96% believe they have a well-articulated corporate innovation strategy.
“While it may seem difficult to justify innovation investments amid the current economic uncertainty, corporate leaders also see the immense value that R&D and innovation programs can provide,” said Dr. Robert Lowe, CEO and cofounder of Wellspring. “Our findings show that today’s bullish attitudes toward innovation go beyond just digital transformation, spanning a wide range of disciplines including robotics, AI, synthetic biology, and cleantech, among others.”
Supply chain and inflation issues are a short-term concern
According to the survey, 75% of respondents reported that supply chain issues were having some impact on their innovation activities. Yet, only 10% of leaders expect supply chain woes to exert a significant effect on innovation activities. Although it has been common to deprioritize longer-term innovation projects when supply chain problems overwhelm the organization, almost everyone assumes that strategic priorities will continue. Even these distractions appear to be transient, as more than three-quarters (77%) of respondents expect supply chain issues to subside within the next 12 months.
Despite extra caution amid the current macroeconomic climate, the survey found that most innovation leaders do not expect to make permanent changes to their strategic ambitions. In fact, nearly one third of respondents (31%) expect inflation pressures will make their company more willing to invest in longer-term strategic innovation programs. And although inflation’s effect on innovation activities may last somewhat longer than supply chain issues, the vast majority of respondents (83%) expect the lingering effects of inflation to dissipate within the next one to two years.
“A few years ago, virtually all large companies viewed innovation programs as fundamentally discretionary activities that could safely be pared back in a downturn,” said Dr. Lowe. “But now, with large structural changes looming – including geopolitical instability, the threat of future pandemics, and the economic effects of climate change – leaders increasingly view R&D and innovation programs as mission-critical.”
The innovation mandate has shifted
By 2022, most innovation leaders had moved beyond early-pandemic crisis mode. Even as some continued to navigate aftershocks, such as supply chain challenges and mounting inflation concerns, attention has swung back to creating future value. This ongoing shift has yielded an interesting mix of innovation outcomes – some of which have changed markedly since 2021:
- Improve customer engagement with existing products (57%)
- Respond to new market entrants (49%)
- Capture novel white space opportunities (41%)
- Address customer needs which aren’t met today (40%)
- Develop new technologies ahead of competitors (39%)
- Expand value proposition into an adjacent market (37%)
- Address long-term strategic threats to the business (36%)
- Disrupt current industry and reconfigure value chain (21%)
Companies are feeling a heightened need to respond to new competitors encroaching on their space – a priority which has tripled, from 16% in 2021 to 49% this year. A close counterpart of such efforts is the ability to identify and selectively exploit new whitespace opportunities ahead of others, which has more than doubled in priority, from 17% to 41%.
Companies are investing in the future with innovation
Companies are implementing programs that seek to chart new territories in innovation. As a new wave of innovations appear on the horizon – for example, the potential that AI and machine learning will automate insight collection and decision-making – companies will continue to drive mass digital transformation efforts across industries. From the survey, 41% of respondents are currently piloting an innovation center or lab, which has nearly doubled from 2021. There was also a 75% uptick in companies funding new innovation centers at 49% this year.
Based on the survey, 41% of leaders are also developing research partnerships with academia and formalizing technology scouting programs, respectively. There was a 38% increase from 2021 in respondents who said they are currently investing in emerging technologies – rising to 40% this year. And, 36% are engaging in venture investing as well, another important component of a strategic innovation approach.
“While many companies may have seen disruptive technologies as a threat, R&D and innovation leaders see opportunities sprouting up everywhere on the horizon,” said Dr. Lowe. “One side effect of the pandemic is a renewed appreciation among executives that innovation cannot be short-changed, at least not without significant downside risk. As a result, firms are investing in the technologies that will power the future of their industries.”
Strength in partnerships and measurement
Partnerships with large technology players (57%), customer groups (55%), venture capitalists (29%), early-stage startups (20%), and universities (17%) all increased well above 2021 levels. In 2022, as travel restrictions have normalized, typical innovation channels have become more active once again. Although large technology partners and customer groups are often featured in core innovation programs focused on product extensions and operational improvements, they’re also implicated in other types of innovation projects. These efforts exist at the forefront of current innovation practice and represent a trend which is independent of the pandemic’s effect. Since most corporations are not set up to interface comfortably with startups, it has become fashionable to partner with incubators and accelerators. These programs serve as gatekeepers, brokering access to regular cohorts of promising entrepreneurs, while also allowing corporations to right-size their time investment.
For years, innovation’s ability to measure its impact on the business has been insufficient – but not for lack of trying. Indeed, R&D and innovation leaders have long wrestled with how to demonstrate their function’s full value to executives and the board. The problem is, while incremental innovations are relatively easy to assess, valuing more ambitious innovation efforts is often little more than conjecture.
This year’s data suggest that innovation leaders are giving big-picture metrics another go. More than half of all respondents (51%) reported that their companies were measuring innovation’s effectiveness on a corporate-wide basis through direct financial measures – an increase of 59% above 2021 levels. Similarly, the percentage of firms that are consistently measuring process- and stage-based innovation metrics (velocity through the pipeline, rate of new project creation, etc.) increased from 23% in 2021 to 43% in 2022.
What’s holding innovation back?
Innovation within companies faces two conflicting realities. On one hand, large corporations have been making flashy investments in new innovation centers, corporate venturing units, and startup accelerators. Meanwhile, mainline R&D and innovation functions are being asked to “do more with less.” This dichotomy has led to survey respondents overwhelmingly viewing their jobs as harder this year. The biggest impediments to innovation success include:
- Culture of “not invented here” and institutionalized risk aversion – an increase of nearly 5x from 2021
- Too much stakeholder pressure to cut costs and being underfunded (39%) – an increase of more than 2x from 2021
- Colleagues not having time for innovation or innovation being under-staffed (36%) – an increase of 4x from 2021
- Bureaucracy and being unable to pivot to make innovation decisions (15%) – an increase of more than 2x from 2021
From the survey, 35% of respondents listed an inability to recruit innovation talent as a “very significant” concern. And yet, given the extreme difficulties employers of all stripes have experienced in retaining exceptional talent in the recent labor market, it is surprising that this impediment hasn’t grown even more pronounced for innovation teams. Additional impediments included lack of executive leadership and coordination for innovation (34%) and not enough vision or a sufficient innovation strategy (34%).
“As companies finally come out from the pandemic’s shadow, strategic innovation programs are making significant strides across industries, which has kick-started renewed attempts to effectively measure innovation success,” said Dr. Lowe. “Companies need to fine-tune their innovation priorities and make adequate investments accordingly. Failure to do so will ensure we return to the pre-pandemic model of throwing money at R&D and innovation without being able to properly assess the returns.”
For more information and to see the full report, see here.
About the Study
Wellspring’s fourth-annual R&D and Innovation Study includes a global sample of 553 mid- and senior-level corporate innovation professionals across industries. Respondents were based in the U.S., U.K., continental Europe, Japan, Australia, and New Zealand, and were current employees at firms of $1B or more in annual revenue. In the data analysis, Wellspring controlled for company size, headquarters location, primary industry, and other factors.
Wellspring is the world's leading provider of R&D and Innovation Management software and solutions for corporations, universities, and government agencies. We help clients succeed in today's innovation economy by coordinating global R&D and innovation programs – managing development portfolios, researching technology trends, finding innovation partners, identifying startups, and commercializing inventions. Wellspring works with more than 500 organizations worldwide to support the continued development of the global Knowledge Supply Chain. For more information, please visit wellspring.com.